Volkswagen Reports 86% Slump in Q3 Net Profit

(Adds quote, detail).

FRANKFURT -(Dow Jones)- Germany's Volkswagen AG (VOW.XE) said Thursday that third-quarter net profit dropped 86% on the year to EUR172 million as the auto market downturn took its toll, but confirmed that it still expects to fare better than its rivals and gain market share during the crisis.

"Volkswagen Group is holding its own extremely well despite the adverse conditions," Chief Executive Martin Winterkorn said in a statement. "At the same time, the trend in the automotive industry means that there is no reason for premature optimism. The business climate remains tough," he added.

Europe's largest automaker by sales reiterated that revenues and vehicle sales this year are expected to come in lower than in 2008, but it still expects to post a profit for the full-year.

Volkswagen steered better through the industry gloom than most of its rivals, thanks mainly to a large presence in dynamic markets such as China and Brazil and a relatively small exposure to the troubled U.S. market.

Additionally, Volkswagen was one of the biggest beneficiaries of state-backed scrapping incentive schemes in many major markets, including its German home turf, which sparked demand for its line-up of small and compact cars.

Operating profit fell 81% on the year to EUR278 million in the third quarter. Third-quarter revenue was down 10% at EUR26 billion as vehicle sales contracted by 8.9% to 1.67 million cars and trucks.

Net liquidity in Volkswagen's automotive division stood at EUR13.4 billion at the end of the third quarter, up EUR5.4 billion from end of last year.

The company's Audi AG (NSU.XE) premium brand continued to be the biggest contributor to the group's earnings in the first nine months of the year, with operating profit coming in at EUR1.17 billion compared to EUR2.06 billion in the same period in 2008.

-By Christoph Rauwald, Dow Jones Newswires; +49 69 29 725 512; christoph.rauwald@dowjones.com

(END) Dow Jones Newswires

10-29-09 0544ET